June 9, 2011
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Question
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Ken:
I have an opportunity to buy another company's accounts. They have contracts. I have yours. My questions is will I need new contracts signed with my company or can I use the existing contracts to take over? (provided they have an assignment clause in them)
Thanks for your forum. It's great!
John
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Answer
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A common misperception is that you need an assignment provision in a contract in order to assign it. That's not typically true. Usually only personal service contracts [such as an entertainer's agreement to perform] are not assignable without a specific assignment provision. Otherwise, contracts can be assigned unless there is a specific restriction.
Alarm contracts usually restrict the subscriber from assigning the contract. The alarm company would prefer to hold the subscriber to the contract. If there is a new occupant the alarm company will want to contract directly with that occupant.
The alarm contracts often specifically permit the alarm company to assign the contract or subcontract out work. In my Standard Alarm Contracts I use that provision to also extend the protective provisions in the contract to protect the assignee and subcontractors. Even without the clause the alarm company should be able to assign and sell the contract to another alarm company. Putting that provision in the contract removes any question on the issue.
You should know a few other things about assigning the contract. Absent a specific provision in the assignment clause [which I do have in the Standard Alarm Contract forms] the assignor [the seller] remains liable for the conduct of the assignee. That's not something an alarm seller wants to be responsible for and the assignment provision should specify that the assignor is relieved of further performance upon assignment.
The opposite is generally true for subcontractors. The general contractor will not be responsible for the negligence of the subcontractor, but can be liable for negligently selecting that subcontractor, and for breach of contract.
As far as whether a buyer of alarm subscriber accounts needs to get new contracts signed, my Standard Forms in particular, will depend upon the existing contracts. If they are well written then there is no reason that new contracts will be needed, other than to update the contractual relationship and get a new term in place. If the existing contracts are not well written, have expired, or have other deficiencies that call the contract's enforceability into question, then get new contracts signed.
Contracts should be considered a valuable asset or property, but not all contracts have the same value. The value varies with many factors, including but not limited to, term, collection provisions, and most importantly, the protective provisions. You don't want one poorly written contract that you buy putting your entire company at risk.